1. These appeals by special leave raise a common question regarding the validity of the Orissa Entertainment Tax Act, 1946 (hereinafter referred to as "the Act"). The question is whether in the absence of a machinery regarding assessment being provided either in the Act or in the Orissa Entertainment Tax Rules, 1947 (hereinafter referred to as "the Rules") a demand for payment of excess entertainment tax could be validly made under the provisions of the Act.
2. Civil Appeals Nos. 312-315 of 1974 filed by Ravi Talkies relate to demand for excess entertainment tax for the period 1-9-1965 to 30-9-1968; Civil Appeal No. 316 of 1974 filed by Balasore Talkies (P) Ltd. relates to demand for the period from March 1961 to June 1962; and Civil Appeal No. 317 of 1974 filed by Shri Vithora Talkies relate to demand for the period from 14-11-1958 to 31-12-1959. The said demands have been quashed by the Orissa High Court by the impugned judgments.
3. The Act was enacted to provide for the levy of a tax on amusements and other entertainments. In Section 4, provision was made for levy and payment to the State Government of a tax on all payments for admission to any entertainment at such rates as are prescribed by notification by the State Government. It enables the State Government to fix the said rates on the basis of the price of the ticket issued for admission to the place of entertainment. Section 5 made provision for composition and payment of a fixed sum as tax on the application of the proprietor of any entertainment in respect of which tax was payable under Section 4. By Section 6, it was prescribed that save in the cases referred to in Section 5, no person shall be admitted for payment to any entertainment where the payment is subject to tax except with a ticket stamped with an impressed, embossed, engraved or adhesive stamp issued by the State Government. In the said section, provision was also made for furnishing the returns of the payment for admissions to any entertainment. In Sub-section (1) of Section 7, it was prescribed that the tax shall be levied in respect of each person admitted for payment and in the case of admission by stamped ticket, the tax shall be paid by means of the stamp on the ticket and in the case of admission otherwise than by stamped ticket, the tax shall be calculated and paid on the number of admissions. In Sub-section (2) of Section 7, it was provided that the tax in the case of admission otherwise than by stamped ticket shall be recoverable from the proprietor. Section 8 empowers the State Government to grant exemption to entertainments from payment of tax. Section 10 lays down that any amount due on account of tax or penalty can be recovered by the State Government as if it were an arrear of land revenue. Section 11 provided that any officer authorised by the State Government in that behalf may enter any place of entertainment while the entertainment is proceeding and any place ordinarily used as a place of entertainment at any reasonable time for the purpose of seeing whether the provisions of the Act or any rules made thereunder are being complied with. Section 14 made provision for imposition of penalty by the Commercial Tax Officer if the proprietor of any entertainment admits any person for payment to any place of entertainment in contravention of the provisions of Section 6, or fails, without sufficient cause, to pay the tax due from him within the time prescribed, or fraudulently evades the payment of arrear tax due under the Act, or contravenes any of the provisions of the Act. The amount of penalty that could be imposed was Rs. 250 or double the amount of tax, if any, evaded, whichever is greater. In the proviso to Sub-section (2) of Section 14, it was prescribed that before imposing a penalty the proprietor shall, in every case, be given a reasonable opportunity of adducing evidence in answer to the allegations made against him and of being heard. Sub-section (3) of Section 14 made provision for filing of an appeal to the Assistant Commissioner of Sales Tax against an order imposing penalty passed by the Commercial Tax Officer under Sub-section (2) of Section 14. A revisional power was conferred on the Commissioner under Sub-section (5) of Section 14 to revise, on his own motion or on an application by any person aggrieved by an order made under Sub-section (4) of Section 14.
4. In exercise of powers conferred under Section 16 of the Act, the Rules have been framed. In Chapter II (Rules 2 to 20) provision was made regarding payment by means of stamps. Rule 16 required the proprietor to keep a Register of Entertainment Tax Stamps, a Show Register and a Register of Ticket Books as per the prescribed forms and to make necessary entries of the tickets sold and the prices thereof in the Show Register within 45 minutes after the show starts and also to close the Stock Register of Stamps at the end of each day under his dated signature. Rule 17 provided for production of the books and records kept by the proprietor for inspection by the Commissioner or Commercial Tax Officer maintained by him. Chapter III (Rules 21 to 33) dealt with payment of the tax at a specified percentage of the gross proceeds or on the basis of returns. Rule 27 made provision requiring the proprietor to submit the returns and to pay the tax due as per return and attach the treasury receipt to the return to which the tax relates. Chapter IV (Rules 34 and 35) dealt with payment of the tax by composition. Chapter V (Rules 36 to 43) dealt with payment of the tax in cases where admission is controlled by mechanical contrivance. Rule 40 contained a provision similar to that contained in Rule 27 where the proprietor was required to keep the accounts and to submit the returns to the Commissioner and pay the tax due and to attach the treasury receipt to the return to which the tax relates.
5. After taking note of the provisions contained in the Act and the Rules, the High Court has observed that while Section 4 of the Act undoubtedly creates a liability for payment of tax and in pursuance of this liability, it is open to a proprietor on whom the liability rests to collect the tax from visitors and deposit the same in the treasury. The High Court has, however, observed that cases may arise where the quantum of the tax deposited by the proprietor is disputed and some authority shall have been designated under the Act and the Rules who should have power to decide such disputes and that such a provision is absent in the Act and in the Rules and that neither the Act nor the Rules have vested any authority either in the Commissioner or in any of his subordinate officers to make any assessment of the tax either suo motu or in the case of any dispute and that being so, the Commercial Tax Officer acted without authority in making the impugned assessments. The High Court has, therefore, quashed the assessments which were challenged by the respondents in the writ petitions that were filed by them.
6. We have heard Shri P.N. Misra, the learned counsel appearing for the State, in support of these appeals. The respondents, even though served, have not appeared to contest the appeals.
7. Shri Misra has pointed out that under Section 4, the legislature has used the word "levied" which is much wider in ambit and covers the whole process of assessment of tax and collection thereof. The submission of Shri Misra is that having regard to the nature of the tax imposed, the Act and the Rules make adequate provisions for the levy and collection of tax by prescribing the rate at which the tax has to be paid and how it should be paid. In Section 6, provision is made for payment of tax in the form of adhesive stamps to be affixed on the tickets which are issued for admission to any entertainment. In cases where the admission is otherwise than by tickets, the amount of tax is to be calculated on the basis of admissions and that the Rules made adequate provisions for maintaining proper registers and accounts for inspection of the records required to be maintained and for filing of regular returns or for payment of tax as per returns and for attaching the receipt about payment of tax with the return. The submission is that in view of the provisions contained in the Act and the Rules, it cannot be said that there is no procedure for assessment as prescribed in the Act and the Rules. It has also been submitted that in cases where the correctness of the registers or the returns is doubted, action can be taken by the Commercial Tax Officer under Section 14 of the Act to impose penalty in addition to the tax which has escaped and before taking such action, notice has to be given to the proprietor and an opportunity is given to him to adduce evidence in answer to the allegations made against him. An appeal lay against the order passed by the Commercial Tax Officer under Section 14 to the Assistant Commissioner of Tax and there was a further right to move the Commissioner in revision. Shri Misra has placed reliance on the decision of this Court in CCE v. National Tobacco Co. of India Ltd.1
8. We find considerable merit in the aforesaid submissions of Shri Misra. Having regard to the nature of the tax, the Act makes provision for levy of tax on the basis of admission to any entertainment and also prescribes the rate at which such tax will be levied which rate is fixed on the basis of the payment made for the purpose of admission to the entertainment. The Act makes provision for collection of the tax through stamp on the ticket sold by the proprietor of any entertainment for admission to the entertainment and in case where it is not collected by stamp it has to be paid on the basis of the number of admissions and for that purpose provisions are contained in the Rules for maintaining proper registers and for filing of returns and payment of tax as per returns and attaching the receipt with the returns. In the event of failure on the part of the proprietor to pay the tax which is payable by him, provision is made in Section 14 for taking action to impose a penalty for such default and under Section 14 (sic). The power to -take action under Section 14 was conferred on the Commercial Tax Officer. An appeal lay against the order passed by such officer to the Assistant Commissioner of Tax and further revision lay to the Commissioner. In view of the aforementioned provisions contained in the Act and the Rules, we are unable to agree with the High Court that neither the Act nor the Rules contained a procedure regarding assessment of tax. In this context, it may be pointed out that in the case CCE v. National Tobacco Co. of India Ltd., this Court, while rejecting that the Central Excise Rules, 1944 neither specify the kind of notice which should precede assessment nor lay down the need to pass an assessment order, has said:
"All we can say is that rules of natural justice have to be observed for, as was held by this Court in K.T.M. Nair v. State of Kerala 'the assessment of a tax on person or property is at least of a quasi-judicial character'."
9. As indicated earlier, the Act and the Rules contained adequate provisions prescribing the manner in which the tax is to be collected and the procedure to be followed in cases where the proprietor fails to pay the tax which has to be levied under the provisions of the Act and in case any penalty is to be imposed, it is required that the proprietor should be afforded an opportunity of being heard. It cannot, therefore, be said that the Act does not contain the procedure for assessment of tax. In the circumstances, we are unable to uphold the impugned judgments of the High Court.
10. The appeals are, therefore, allowed, the impugned judgments of the High Court are set aside and the writ petitions filed by the respondents are dismissed. No order as to costs.